Nothing is more valuable than cash in hand.
But many families are living paycheck to paycheck and, sometimes, that next paycheck is not coming soon enough.
The offer is enticing: Cash in minutes! No credit check! Fast cash!
So, you need money now. What could be easier than a payday loan?
"You get your loan, you pay it back. Yeah, it's sort of expensive, but it's not the end of the world," says Brian Delaney, Chief Executive Officer of Consumer Credit of the Quad Cities, a credit counseling service with offices in Davenport.
Payday loans are also very popular. Ten years ago there were only eight cash advance stores in all of Iowa. Now there are eight in Davenport alone.
So, business is good - for the lenders.
Just how expensive are payday loans?
Advance America says a $100, 14-day loan will cost you and added $16 in interest. That's a 430% annual percentage rate. At Check 'N Go, interest on a $100 two week loan has a 404% APR. At Check Into Cash, it's 407%.
"I can't see a situation where it ever pays off, quite frankly," says Ascentra Credit Union president Dale Owen.
Owen says payday loan companies are seen as lenders of last resort, but credit unions can be the alternative for those who have what he calls "colorful credit" histories.
"Being a realist, I know there's a lot of great people in tough times, tough situations, and they're working their way out of it," Owen said.
Opening an account can help build credit, but that takes time.
Some turn to the second-oldest business in the world.
Christopher Shumaker has been in the pawn shop business since he was 14.
Though pawn shop collateral loans aren't regulated, he says they still come nowhere close to the 300% to 400% APR charged by payday lenders.
"That's higher than a percentage rate you're going to get on a credit card, that's higher than a percentage you're going to pay at a pawn shop, that's higher than the percentage rate you're going to pay - quite literally - anywhere else," says Christopher Shumaker, owner of Quick Cash Pawnbrokers in Davenport.
Surveys have found a quarter of all Americans have no savings account. So when the unexpected happens, they're stuck between a rock and a hard place.
"There's single mothers coming in that just need money to get to their check on Friday, there's people strapped for their unforeseen bill that popped up," says Shumaker.
The other problem with payday loans is the cycle they may create.
A list of 24 Consumer Credit customers, who are trying to get their debt under control, shows one person with 15 payday loans. That person owes more than $10,000.
"The worst thing you can do is get another loan to pay off a loan," says Delaney.
Delaney says you need to get help before you take that step. And the sooner the better.
"I'm willing to bet that there are a number of people who get payday loans that really could get other credit if they tried," he says.
- PAY BACK YOUR LOAN. Pay it back in full before the deadline. And make sure you paid it in full, that there aren't fees and expenses associated wit the loan that could still haunt you.
- BORROW ONLY AS MUCH AS YOU CAN. Don't over-borrow, taking out a loan for more money than you'll be able to pay back on the due date. That's where you lose your money quickly as the interest rate starts making the loan even more costly to you.
- BEWARE OF OTHER OFFERS. Loan companies may steer you away from payday loans toward title loan or specialized installment loans. These are not regulated in the same way as payday loans and they could end up taking even more away from you.
- READ THE CONTRACT THOROUGHLY. Understand all the terms. Once you've signed for a loan, it's difficult to argue you didn't know what you were doing. Make sure you know the fine print.
- DON'T BURY YOUR HEAD IN THE SAND. The worst thing you can do is ignore a late payday loan. There are agencies that can help you dig yourself out of debt and still find a way to settle with your creditors. Time IS money. Don't waste either.